[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







                   U.S. FOREIGN POLICY TOWARD UKRAINE

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 6, 2014

                               __________

                           Serial No. 113-129

                               __________

        Printed for the use of the Committee on Foreign Affairs






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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida       ALAN S. LOWENTHAL, California
TREY RADEL, Florida--resigned 1/27/  GRACE MENG, New York
    14 deg.                          LOIS FRANKEL, Florida
DOUG COLLINS, Georgia                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director


















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Eric Rubin, Deputy Assistant Secretary, Bureau of European 
  and Eurasian Affairs, U.S. Department of State.................     5
The Honorable Paige Alexander, Assistant Administrator, Bureau 
  for Europe and Eurasia, U.S. Agency for International 
  Development....................................................    13
Mr. Daleep Singh, Deputy Assistant Secretary for Europe and 
  Eurasia, U.S. Department of the Treasury.......................    19

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Mr. Eric Rubin: Prepared statement...............................     8
The Honorable Paige Alexander: Prepared statement................    15
Mr. Daleep Singh: Prepared statement.............................    21

                                APPENDIX

Hearing notice...................................................    44
Hearing minutes..................................................    45
The Honorable Edward R. Royce, a Representative in Congress from 
  the State of California, and chairman, Committee on Foreign 
  Affairs: Material submitted for the record from the Embassy of 
  Ukraine........................................................    47
The Honorable Joseph P. Kennedy III, a Representative in Congress 
  from the Commonwealth of Massachusetts: Prepared statement.....    51

 
                   U.S. FOREIGN POLICY TOWARD UKRAINE

                              ----------                              


                        THURSDAY, MARCH 6, 2014

                       House of Representatives,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 9:05 a.m., in 
room 2172 Rayburn House Office Building, Hon. Edward Royce 
(chairman of the committee) presiding.
    Chairman Royce. I am going to call the hearing to order at 
this time. We will ask all the members if they can come in and 
take their seats for this hearing.
    Let me begin by pointing out that Ukraine is facing not one 
crisis but a number of them. Its new government is confronting 
an economic and financial crisis brought on by years of 
mismanagement, years of corruption by previous government 
officials and it is doing this while under military invasion 
and economic coercion by neighboring Russia. The world has been 
speaking up, sending a clear message and that message is that 
Moscow's actions over the past week are out of bounds.
    The new government in Kiev cannot succeed without strong 
and rapid support by the international community. Working in 
close cooperation with our European allies, the U.S. is 
crafting an immediate assistance package. But this help must be 
accompanied by fundamental economic reforms if Ukraine is to 
stabilize its economy. Only Ukraine can help us help them.
    I will also mention that later this month, prior to the 
elections in Ukraine, I will be leading a codel to the country 
because we must also help to ensure that the elections 
scheduled for May will be fair, will be free and reflect the 
true voice of the Ukrainian people in all regions of the 
country, a country that is becoming increasingly divided, and I 
think our oversight and engagement there right now is very 
important. A successful election is essential to Ukraine's 
ability to resolve the many issues its got on its plate and to 
advance toward democracy and security, and long-term toward 
prosperity.
    Addressing Ukraine's energy security must be part of our 
response. Russia has repeatedly used its supply of natural gas 
to pressure Ukraine economically and politically, and has 
announced that it will significantly increase its cost in a 
deliberate effort to squeeze Ukraine.
    Fortunately, we have an option to help counter this threat, 
namely, reducing the current impediments to exports of American 
gas to the Ukraine. The administration has it within its power 
to do this by removing the current bureaucratic obstacles that 
only empower Putin. They should do so rapidly.
    This committee is working to provide appropriate assistance 
to all Ukrainian people but also to pressure Russia to withdraw 
its forces and cease its efforts to destabilize Ukraine. As 
part of that effort, immediately following this hearing, we 
will mark up a resolution that the ranking member and I have 
introduced that condemns Russia's aggression and outlines these 
steps.
    I strongly encourage the administration to increase efforts 
to isolate Russia diplomatically. There is much that should be 
done, such as introducing a resolution at the U.N. Security 
Council that condemns Russian aggression, isolating Moscow.
    The rest of the international community will support such a 
resolution. Moscow alone will veto it but it will increase the 
pressure.
    The Treasury Department should also make clear that the 
U.S. is on the lookout for Russian banks that are involved in 
illicit activities, such as the transfer of stolen Ukrainian 
assets, and especially those banks that are primarily owned by 
the government or by the oligarchs. We also in our resolution 
lay out other steps that should be taken such as the limitation 
on travel.
    Many of us have been calling for action and last evening 
the administration called me to indicate that it was going to 
take steps on precisely these issues--the visa and asset bans 
here--and so we will look forward to that statement from the 
administration I think further elaborating on the Executive 
order announced early this morning.
    But we must remember that the purpose of our pressure on 
Russia is not simply to punish aggression and certainly it is 
not to escalate the confrontation, but instead to move Putin 
toward a resolution that protects the territorial integrity of 
Ukraine.
    That is our ambition here, and as we look forward we have 
with us today three administration witnesses to answer 
questions from members regarding the current situation in 
Ukraine and the administration's ongoing efforts to provide 
assistance to Kiev and to pressure Russia.
    The ranking member will be here shortly and while he is en 
route I will also take this opportunity to introduce our 
witnesses. We have limited time this morning so before I 
introduce the witnesses we are honored to have with us today 
Ambassador Motsyk from the Embassy of Ukraine.
    Mr. Ambassador, we know that it is a very difficult time 
for your country and we want to extend a very warm welcome to 
you. As you can see, Ukraine has many friends on this 
committee.
    This morning we are pleased to be joined by representatives 
from the Department of State, the U.S. Agency for International 
Development, and the Department of the Treasury.
    A career Foreign Service officer, Mr. Eric Rubin previously 
served as Deputy Chief of Mission at the U.S. Embassy in Moscow 
from 2008 until 2011 before assuming his duties as Deputy 
Assistant Secretary in the Bureau of European and Eurasian 
Affairs.
    With over 20 years of experience working in international 
development in the region, Ms. Paige Alexander is the Assistant 
Administrator of the Bureau for Europe and Eurasia at the U.S. 
Agency for International Development.
    Mr. Daleep Singh is the Deputy Assistant Secretary for 
Europe and Eurasia at the U.S. Department of the Treasury. He 
advises the senior economic leadership at the Department of 
Treasury and the White House on global markets.
    And without objection, the witnesses' full prepared 
statements are going to be made part of the record. I am going 
to encourage you all to summarize and just use your time to 
present your viewpoints and afterwards the members will have 5 
calendar days to submit statements and questions and any 
extraneous materials for the record.
    Without objection, as member offices were notified last 
night, in light of our time constraint Mr. Engel and I are 
suggesting we limit to 3 minutes per member to help maximize 
participation of all the members this morning.
    And if I could now go to our ranking member, Mr. Engel, 
whose family is originally from the Ukraine--Mr. Eliot Engel 
from New York.
    Mr. Engel. Thank you. Thank you very much, Mr. Chairman.
    Deputy Assistant Rubin, Assistant Administrator Alexander, 
Deputy Assistant Secretary Singh, thank you for appearing 
before the committee today and for your tireless efforts over 
the past several months in support of Ukraine.
    And let me thank Chairman Royce for calling this hearing on 
an issue which is at the forefront of all our minds right now.
    Since 1991, the U.S. has strongly supported a democratic, 
prosperous, sovereign Ukraine, and in keeping with this 
commitment we supported a peaceful negotiated resolution of the 
recent crisis there, as hundreds of thousands of Ukrainian 
citizens came out in the streets of Kiev and throughout Ukraine 
to express their desire for a more democratic and just state.
    The recent selection of a new interim government signaled 
that Ukraine was back on the path toward stability and 
political and economic health. But instead of welcoming this 
event, as was the case in the U.S. and Europe, President Putin 
has reacted in a very different and very disturbing manner.
    So let me be clear. President Putin's aggressive military 
actions in Crimea flagrantly violate Ukraine's sovereignty and 
territorial integrity. They violate international law and they 
violate Russia's commitments to Ukraine.
    They are deeply destabilizing and have serious implications 
for security in Europe. All of us should be profoundly 
concerned about this.
    And furthermore, his justification for this aggression is 
completely unsupported by the facts. There has been no 
persecution of Russians or Russian speakers in Ukraine. All 
credible observers agree on this point.
    So I believe this is a critical moment. The U.S., our 
European allies and the international community must stand up 
for Ukraine's unity and territorial integrity. Russia has deep 
historical and cultural ties with Ukraine and Russia and 
Ukraine should enjoy good and close relations.
    President Putin must respect Ukraine's sovereignty and the 
right of its people to freely make their own choices and chart 
their own future and Russia must also understand that there are 
consequences for its aggression.
    I think we should consider a range of sanctions including 
visa bans, freezing assets, and banking sanctions so that 
President Putin understands that this will not be business as 
usual.
    I call on our European allies and other members of the 
international community to take similar measures. I also 
support the administration's initiative to send international 
observers to monitor the situation in Crimea and other parts of 
Ukraine.
    Russia, in turn, should welcome such a mission, return its 
troops to their bases immediately and comply with its 
commitments. Our other immediate priority should be to help 
Ukraine's interim government deal with the formidable 
challenges that it faces. Secretary Kerry was just in Kiev, and 
this was the right time to go and the right way to show our 
support.
    Given Ukraine's dire economic situation, we and our 
European allies should be ready to provide a robust assistance 
pledge. I strongly support the administration's initiative to 
provide loan guarantees to Ukraine and I am very pleased that 
the House will pass legislation authorizing these guarantees 
later today.
    I also welcome the EU's announcement that it also will 
provide very sufficient loans and credits and, of course, we 
must also support Ukraine's efforts to reach an agreement with 
the IMF and implement reforms to address structural weaknesses.
    We should also provide additional assistance in areas of 
urgent need, such as to help Ukraine recover looted assets, 
combat corruption, conduct free and fair new elections, 
increase energy security and counter politically motivated 
trade actions by Russia.
    With regard to this last point, I also believe we and the 
EU must steadfastly support other nations facing similar 
Russian pressure, such as Moldova and Georgia. As Ukraine's 
leaders restore stability and order in the country, I urge them 
to reach out to all groups and regions and to work together to 
build a tolerant, pluralistic society.
    The interim government and any Ukrainian Government must 
protect the rights of all minority populations and make it 
clear that it represents all Ukrainian citizens.
    Let me take this opportunity to say a word about anti-
Semitism, which has been mentioned as another justification for 
Russian military aggression.
    I recognize that there is a concern, but as the respected 
NCSJ recently stated, and I quote,

        ``While there has been isolated incidents in Crimea and 
        eastern Ukraine since the protests began in November, 
        there has not been a pattern of violence against the 
        Ukrainian Jewish population.''

    And finally, let me once more thank our witnesses and the 
administration for its tireless efforts over the past several 
months to support democracy in Ukraine. As the people of 
Ukraine confront the many challenges ahead, they should know 
that the United States will stand with them.
    We will support Ukraine's sovereignty and territorial 
integrity and we will support Ukrainian aspirations to build a 
more democratic, prosperous and just future for their country.
    Thank you, Mr. Chairman.
    Chairman Royce. Thank you. We are going to go to Mr. Rubin.

STATEMENT OF MR. ERIC RUBIN, DEPUTY ASSISTANT SECRETARY, BUREAU 
   OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Rubin. Thank you, Chairman Royce, Ranking Member Engel, 
members of this committee. I am grateful for the opportunity to 
speak to you today on U.S. policy toward Ukraine.
    I would also like to express appreciation for Ukrainian 
Ambassador Motsyk joining us today. We very much appreciate his 
presence. Let me begin by thanking this committee for its deep 
engagement on this issue.
    In our efforts to back the aspirations of the Ukrainian 
people, we have been heartened by the robust bipartisan support 
that we have received from this committee and from Congress 
more broadly.
    House Resolution 447, introduced by Ranking Member Engel 
and passed by the House on February 10th, sent a powerful 
message that the American people stand wholly and unequivocally 
with the people of Ukraine in their hour of need. You have 
notified us that you are marking up a new resolution today and 
we welcome your leadership.
    We have had close and constant contact with Congress in 
every step of this grave situation. Our united efforts have 
demonstrated to the people of Ukraine and to the international 
community that the United States is resolute in its support of 
Ukraine's desire for a democratic, peaceful and prosperous 
future.
    I would like to address two areas in my remarks. I will 
begin by discussing the political situation in Ukraine. Second, 
I will talk about regional stability, Russia's military 
intervention in Ukraine and the response of the United States 
and the international community to Russia's action.
    I have submitted a more detailed written testimony for the 
record. I underscore that the situation in the region is 
extremely fluid and changing by the hour. We continue to adapt 
as it evolves.
    I would also like to underscore that the situation has 
changed as recently as this morning and we have taken 
additional actions as recently as this morning, which I am 
prepared to discuss in further detail.
    Let me also add a few words about my own deep personal 
commitment to Ukraine and its future. I first worked to support 
the Ukrainian people and their aspirations for freedom in 1989 
when I was the internal politics and nationalities affairs 
officer on the Soviet desk of the State Department.
    I helped open relations with independent Ukraine in 1991, 
and my wife and I lived and worked in Kiev from 1994 to 1996 in 
the early days of Ukraine's independence.
    I speak Ukrainian and I have friends throughout Ukraine. 
Over the tumultuous events of the past several months, I have 
watched with horror as Ukrainians were cut down by snipers in 
the heart of Kiev.
    But I have also been inspired by the people of Ukraine--
their determination, their courage, and their insistence on the 
possibility of a better future for themselves and their 
country.
    I would like to start by emphasizing that the democratic 
transition that has occurred in Ukraine is an expression of 
will of the Ukrainian people. It is not about the United 
States. It is not about Russia.
    The people of Ukraine have made a decision about their 
future. The Rada, the country's democratically-elected 
Parliament, has taken the steps of creating a transitional 
government following former President Yanukovych's abdication.
    Ukraine's lawmakers in the Rada have fulfilled their 
obligation to the people by preparing to tackle pressing 
economic and political issues facing the country until new 
Presidential elections can be held in May.
    These decisions have been supported by overwhelming 
majorities in the Rada including members of President 
Yanukovych's party. The United States welcomed the formation of 
the new government and is working with its leadership as it 
ensures the protection of the rights of all Ukrainians 
including all minorities.
    As the international community looks for ways to help 
Ukraine, we will focus on the government's efforts to build a 
strong, sovereign and democratic country reflecting the will of 
the people of Ukraine.
    The decision of the Ukrainian people regarding their 
government needs to be respected. Russia's military 
intervention in Ukraine has endangered the promise of Ukraine's 
democratic transition.
    As Secretary Kerry said in Kiev on Tuesday,

        ``The contrast could not be clearer--determined 
        Ukrainians demonstrating strength through unity and a 
        Russian Government out of excuses, hiding its hand 
        behind falsehoods, intimidation and provocations.''

    The United States fully and unambiguously condemns Russia's 
military intervention in Ukrainian territory. We have 
repeatedly indicated that Russia's actions in Crimea are a 
violation of Ukrainian sovereignty and territorial integrity 
and a breach of international law, including Russia's 
obligations under the U.N. Charter and of its 1997 Treaty of 
Friendship with Ukraine as well as Russia's basing agreement of 
1997 with Ukraine.
    Russia agreed in that treaty to respect the sovereignty of 
Ukraine and not to interfere in Ukraine's internal affairs. 
This is also a blatant affront to the 1994 Budapest Memorandum 
and the Helsinki Final Act.
    We have already taken actions consistent with the 
unacceptability of Russia's military intervention. Shoulder to 
shoulder with our G-7 counterparts, we have suspended 
participation in the G-8 Sochi preparations.
    We have suspended all talks with Russia on any future trade 
or investment agreements. We have suspended military to 
military contacts. We have issued a statement with the 
unanimous approval of the members of the North Atlantic Council 
strongly condemning the Russian military escalation in Crimea.
    NATO is stepping up efforts to increase our Baltic air 
policing mission and we are working on ways to strengthen our 
aviation detachment cooperation with Poland.
    We are considering other measures to provide reassurance to 
our allies, and today the United States has marshalled a full 
package of measures aimed at demonstrating the force of U.S. 
resolve in the face of unprovoked military aggression, 
intervention and threats.
    Pursuant to the President's guidance, the State Department 
is putting in place visa restrictions on a number of officials 
and individuals, reflecting a policy decision to deny visas to 
those responsible for or complicit in threatening the 
sovereignty and territorial integrity of Ukraine.
    In addition, the President has signed an Executive order 
that authorizes sanctions on individuals and entities 
responsible for activities undermining democratic processes or 
institutions in Ukraine, threatening the peace, security, 
stability, sovereignty or territorial integrity of Ukraine, 
contributing to the misappropriation of state assets of 
Ukraine, or purporting to assert governmental authority over 
any part of Ukraine without authorization from the Ukrainian 
Government in Kiev.
    We have made it clear to Russia and others that steps to 
undermine Ukrainian democracy and territorial integrity will 
result in further political and economic isolation should they 
continue on this path.
    Mr. Chairman, our focus remains on de-escalation of 
tensions. We continue to explore the possibility of an ``off-
ramp'' that could lead to the relaxation of tensions in 
Ukraine, if the Russians are willing to take it.
    We support direct talks between the Ukrainian and Russian 
Governments. Secretary Kerry met yesterday in Paris separately 
with the foreign ministers of Ukraine and Russia as well as 
with European counterparts in an effort to get such talks 
going.
    The OSCE and the United Nations are in the process of 
deploying monitors in the country, including Crimea and eastern 
Ukraine. These monitors will provide transparency about the 
activity of military and para-military forces, monitors for 
abuse and defuse tensions between groups.
    They, along with senior delegations from our NATO allies to 
the region, will offer objective on-the-ground information to 
counteract Russia's flagrant propaganda campaign.
    And let me be clear on this point. There are no confirmed 
reports of threats to ethnic Russians. No confirmed reports of 
a massive movement of ethnic Russian refugees. No threat to 
Russian naval bases.
    The interim Ukrainian Government is a body that represents 
the will of the Ukrainian people. It is not an extremist cabal. 
Russia's assertions are nothing more than a veneer used to 
justify its military action.
    I would also like to state before this committee that the 
United States is closely monitoring reports of anti-Semitic 
acts.
    We take this issue very, very seriously. It is an issue I 
have worked on for more than 20 years personally and I would 
like to concur with the statement that you made indicating that 
we have no such information indicating that there are 
widespread anti-Semitic incidents.
    We have been in touch with the chief rabbi, with leaders of 
all the major Jewish groups in Ukraine and we believe that this 
accusation is, again, being used to justify an unjustifiable 
military intervention.
    [The prepared statement of Mr. Rubin follows:]


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                              ----------                              

    Chairman Royce. Thank you very much, Mr. Rubin.
    Now, we have 5 minutes for opening statements and so, 
Paige, if you could summarize I think that is for the best.
    Ms. Alexander.

     STATEMENT OF THE HONORABLE PAIGE ALEXANDER, ASSISTANT 
 ADMINISTRATOR, BUREAU FOR EUROPE AND EURASIA, U.S. AGENCY FOR 
                   INTERNATIONAL DEVELOPMENT

    Ms. Alexander. Thank you. Thank you for inviting me here 
today regarding the U.S. assistance package for Ukraine.
    Chairman Royce. Paige, go ahead and put the microphone 
there.
    Ms. Alexander. Sorry. Sorry. So recent events are momentous 
for Ukraine and the response of the United States Government is 
critical to the region's future.
    The U.S. is working with our international partners, 
especially the International Monetary Fund, to provide needed 
support to Ukraine's people and the economy as they face this 
current crisis.
    Our approach is to support the goals and aspirations of all 
people of Ukraine for peace, prosperity, freedom and human 
dignity--the very things that the people have been on the 
Maidan for the last 3 months explaining their concerns.
    So as the chairman mentioned, for the upcoming elections 
USAID and our partners are moving forward with a series of 
programs in five specific areas to help ensure these elections 
are free, fair, transparent and inclusive.
    We will work to improve the legal framework to strengthen 
election administration, support civic oversight of the 
electoral process through observation missions by domestic and 
international monitors, encourage civil society coalitions to 
advocate for further reforms, promote a more balanced, open and 
diverse information environment throughout the country and 
support a robust yet a fair political competition in informing 
the public through support for public opinion polls and 
ensuring training for party poll watchers.
    We also recognize that the more inclusive and accountable 
governments will not be established with just one Presidential 
election.
    Over the mid- to longer-term range, we will pursue a 
multifaceted approach to strengthening Ukraine's democratic 
institutions and process. Years of economic mismanagement have 
left Ukraine with a heavy debt burden, weak regulatory 
oversight of financial institutions and an uncompetitive 
business climate.
    The ongoing economic instability has led to a heightened 
uncertainty in the financial sector, prompting the National 
Bank of Ukraine to impose capital controls as depositors become 
wary of the soundness of domestic banks.
    Recognizing the serious potential for failed banks, USAID 
will work to help provide banking supervision to increase 
public confidence.
    We realize that Ukraine's inefficient and import-dependent 
energy sector continues to be a significant drain on Ukraine's 
financial resources and this needs to be addressed in the 
medium term as well.
    So U.S. technical assistance will be provided to the 
Government of Ukraine as it makes important policy reforms and 
combats the widespread corruption that has prevented Ukraine 
from reaching its economic potential.
    We need to revitalize the support for the private sector 
which has staggered in recent years under an increasing and 
uneven playing field and official harassment.
    USAID is working with many other agencies to develop plans 
to improve the financial sector transparency, reform the energy 
sector and improve the operating environment for private sector 
businesses.
    Mr. Chairman, Mr. Engel, members of the committee, thank 
you for this opportunity to testify on the issues of great 
importance, not only for Ukraine but for the region and for the 
United States.
    This is a critical moment for an opportunity for Ukraine 
and USAID is well positioned to help Ukraine meet some of its 
most pressing challenges, and as my colleagues have noted, the 
IMF will be crucial to those efforts.
    This concludes my testimony. I am prepared for questions.
    [The prepared statement of Ms. Alexander follows:]


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                              ----------                              

    Chairman Royce. Thanks, Ms. Alexander.
    We will go immediately to Mr. Singh.

 STATEMENT OF MR. DALEEP SINGH, DEPUTY ASSISTANT SECRETARY FOR 
      EUROPE AND EURASIA, U.S. DEPARTMENT OF THE TREASURY

    Mr. Singh. Chairman Royce, Ranking Member Engel and members 
of the committee, thank you for the opportunity to testify 
today.
    I visited Kiev last week to meet with government officials 
and express our solidarity during this difficult moment.
    Secretary Lew has spoken several times with the Ukrainian 
Prime Minister, who has assured us that the government is 
prepared to take the necessary steps to build a secure economic 
foundation, including the implementation of urgently needed 
reforms to restore financial stability, unleash economic 
potential and promote the economic aspirations of the Ukrainian 
people.
    The fragility of Ukraine's financial condition underscores 
the urgency of its new government committing to an IMF-led 
reform program and securing the financing it needs while 
difficult adjustments are made.
    The fragile economic situation in Ukraine stems from many 
years of poor policy choices, lack of reform and corruption 
under previous governments as well as the negative confidence 
effect from Russia's recent actions in Crimea.
    Ukraine's new leadership has declared publicly and 
committed privately its willingness to undertake the necessary 
steps to secure assistance from the IMF and others, and the 
United States has made clear that as Ukraine implements reforms 
we will work with our partners to support the Ukrainian people 
and restore the country's economic and political stability.
    As part of this international effort, the United States has 
developed a package of bilateral assistance funded primarily by 
a loan guarantee that is focused on meeting Ukraine's most 
pressing needs. These efforts will complement what must be the 
centerpiece of an international assistance effort and IMF 
program.
    Only the IMF has the capacity to provide the necessary 
large-scale resources and the expertise to design and support a 
reform agenda in Ukraine. An IMF program also sends the 
strongest signal of confidence to markets, businesses and 
households at a time when sentiment remains volatile.
    More specifically, the IMF has the expertise to develop in 
consultation with Ukrainian authorities an economic adjustment 
program that eliminates unsustainable economic imbalances, 
removes costly and poorly-targeted government subsidies and 
improves Ukraine's business climate and competitiveness.
    The central role of the IMF in this assistance effort is an 
illustration of why the IMF is so vital to U.S. economic and 
political interests.
    The IMF is the world's first and most active responder in 
an economic crisis. By providing financial support and hands-on 
policy advice, the IMF helps keep our allies and partners 
strong and prevents economic dissatisfaction from spiraling 
into political instability. This makes the IMF's role critical 
to our nation's economic well being.
    When instability abroad washes up on our shores, lower U.S. 
growth results in fewer jobs and our citizens' savings and 
401Ks are hurt through financial markets.
    For the United States to continue playing a leading role at 
the IMF as it helps Ukraine, one of the most significant steps 
we can take right now is to pass the 2010 IMF quota and 
governance reforms.
    Why is this so important? First, the United States is the 
only major economy that has not passed the 2010 quota reforms 
and our inability to act has led other countries to worry that 
the United States is retreating from its position of leadership 
at the IMF at a time when its role is so pivotal to the future 
of Ukraine.
    Second, the quota reforms would support the IMF's capacity 
to lend additional resources to Ukraine if it needs bridge 
financing to a larger package. We should be in favor of 
providing as much financial flexibility and resources as 
possible to the IMF in support of Ukraine's financial 
stability.
    There exists broad support in the American business 
community for these IMF reforms. The U.S. Chamber of Commerce, 
Financial Services Roundtable, Securities Industry and 
Financial Markets Association, Financial Service Forum and 
Business Roundtable all agree that these changes are necessary 
and in the best interest of American businesses and the global 
economy.
    Part of the reason why the business community supports 
these reforms is that it is a safe and smart investment for the 
United States. The legislation will not add one new dollar to 
overall commitment to the IMF.
    The IMF has a rock solid balance sheet with liquid reserves 
and gold holdings that exceed all of its credit outstanding. 
The IMF has never defaulted on any U.S. Reserve claims on the 
IMF since its inception 70 years ago.
    If we fail to pass the 2010 quota reforms, our voice may 
diminish and we will miss an opportunity to bolster the fund's 
resources and economies may turn away from the IMF toward 
regionalism, bilateral arrangements or new institutions, which 
means that the United States will lose the leverage and 
influence it has built up over decades at a time when our 
leadership on the global stage is so critical.
    Chairman Royce, Ranking Member Engel, members of the 
committee, Ukraine has asked for our support during this 
difficult time and the United States, along with its partners, 
should be ready to answer the call.
    Thank you.
    [The prepared statement of Mr. Singh follows:]


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    Chairman Royce. Thank you, Daleep.
    In the interests of allowing our newer members of this 
committee to ask any questions and get information that they 
need, I am going to forego my time and pass to Mr. Engel of New 
York.
    Mr. Engel. Thank you, Mr. Chairman, and I am going to only 
ask one question to give more people an opportunity to ask 
questions. I think I am going to ask it to you, Mr. Rubin.
    Russia has exerted intense pressure, especially 
economically, on Ukraine in the past and my fear is that 
Ukraine can expect more pressure in the months ahead.
    So how can we and our European allies help Ukraine and 
other countries such as Moldova and Georgia, which are 
attempting to build democratic states, resist this pressure?
    One of the things that worried me about leading to this 
crisis is that Putin, in trying to lure these countries into 
his customs union, offers them all kinds of goodies, bonuses, 
gas, money, and the European Union says well, we would like you 
to affiliate with us in an Eastern partnership but there are 12 
hoops you first have to jump through, and then if you jump 
through them and land on your feet we will consider you.
    I really think that the playing field has not been leveled 
and we create obstacles to having these countries join with us 
to look westward rather than eastward. They all complain to me 
when they come in to my office, and what can we do to change 
this?
    Mr. Rubin. Thank you. I would like to first talk about the 
economic aspects of your question and I think I can point to 
some recent action both on the part of the European Union and 
the United States to address the very concerns you are talking 
about, Congressman.
    I think most importantly I would like to talk about the 
emergency assistance that we have announced, that the European 
Union has announced, which is tied in with the key reforms that 
the Ukrainian Government needs to make to get its economy back 
on its feet.
    The European Union announced a major package this week and 
Secretary Kerry in Kiev announced that we are starting to put 
together a package that will include a $1 billion loan 
guarantee that we have already been consulting with members on 
the Hill about, including this committee.
    And I think it is very important to recognize the perilous 
financial situation that Ukraine finds itself in under Russian 
pressure but also under very serious previous mismanagement and 
bad economic policy.
    The new government has taken a very encouraging and 
promising set of steps and we believe that the new government 
is very serious about moving quickly to get Ukraine back on its 
feet.
    It needs support. We are committed to providing that 
support starting with not just the loan guarantee that we are 
talking about but increased technical assistance and other 
forms of aid, and then, most importantly, working together with 
our allies and partners so that it is the international 
community that is supporting Ukraine with the United States as 
the leading part of that effort.
    Moldova and Georgia are very vulnerable as well, there is 
no question, and we have been working very, very closely with 
their governments.
    We had the Prime Minister of Georgia here 2 weeks ago at 
the White House, meeting with President Obama, Vice President 
Biden, the Prime Minister of Moldova last Monday also meeting 
with the President, the Vice President, the Secretary of State.
    We are working to do everything we can to help them 
financially but also to provide the critical public and 
political support for the democratic choices of their people, 
and we will be doing that in the months ahead.
    But I think it is very important that basically underlying 
the point that this is a critical moment to give them that 
support now when you have governments that are making the right 
choices.
    We recognize that. We will be doing that.
    Chairman Royce. Eric, you are a little too close to that 
mike. Just move it back a little bit.
    Ileana Ros-Lehtinen of Florida.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Chairman, for 
calling this hearing and for your excellent bill. The Magnitsky 
list--that is what I wanted to ask about.
    Denying and revoking visas of Russian regime members who 
are connected to belligerent actions in Ukraine and freezing 
and prohibiting any of their U.S. property transactions are 
moves in the right direction.
    But now we must name and shame these persons, add them and 
other Putin officials responsible for human rights abuses not 
just in Ukraine but in Russia as well to the Magnitsky list, 
which imposes similar sanctions.
    Adding these names to the Magnitsky list would make these 
sanctions permanent rather than an Executive order that the 
President can rescind.
    I have already submitted many names to the Obama 
administration to add to that list since we passed the 
Magnitsky Act and there are many names here--names, position, 
examples and evidence of gross human rights violations.
    I will send a new letter to the administration asking for 
more names of human rights violators to be added to the 
Magnitsky list and I hope that my colleagues will join me in 
that letter.
    And the President must take similar actions in Venezuela 
where Maduro continues his suppression of the people who seek 
freedom and democracy. In the Executive order of the President 
he talks about actions or policies that undermine democratic 
process or institutions in Ukraine.
    Well, Maduro and his officials are also responsible for 
actions and policies that undermine democratic processes or 
institutions in Venezuela, and now is the time to act. Sixteen 
of my colleagues sent a letter to the President asking for 
those similar powers under the International Emergency Economic 
Powers Act.
    So, Mr. Rubin, my question to you is, is the administration 
considering adding more names of Russian officials guilty of 
human rights violations to the Magnitsky list?
    Is it simply a historical document for academics to ponder? 
Are we just going to stay with those few names that we have put 
on the list and have not added many since then?
    Mr. Rubin. Thank you, Congresswoman Ros-Lehtinen.
    We are actively considering adding new names. The answer to 
your question is, absolutely, we take the legislation very 
seriously, and I do not have any new information for you this 
morning but that is something that is under active 
consideration.
    Ms. Ros-Lehtinen. Thank you, sir.
    Chairman Royce. Thank you.
    Gregory Meeks from New York.
    Mr. Meeks. Thank you, Mr. Chairman.
    Let me just see if I can do a real quick question. First, 
Mr. Singh, I know that the Treasury Department is working 
closely with the Department of State and the White House on a 
loan guarantee package for the Ukraine, and you talked about it 
briefly in your opening statement.
    But I was wondering if you can discuss in more detail how 
we in Congress can support and improve the capacity of the IMF 
to provide a guaranteed loan package.
    Mr. Singh. Thank you for your question, Congressman.
    So the IMF, in any assistance package for Ukraine that is 
going to be credible, needs to play a central role and the best 
thing we can do right now is to maintain our leading voice at 
the institution, the IMF, that is going to be at the heart of 
the assistance effort.
    If we don't meet our basic commitments to fund the IMF and 
pass the quota reforms our voice may diminish. Now, there is a 
second reason.
    Passing the quota reform provides the IMF with more 
financing flexibility, particularly in the case where Ukraine 
could need a bridge--a short-term assistance package--as a 
means to get to a larger agreement with the IMF.
    Now, the IMF is on the ground, are looking at the data. We 
don't know yet whether that flexibility will be needed. But it 
is a good idea to have it.
    Mr. Meeks. Thank you.
    Ms. Alexander, as you prepare for the long-term engagement 
in development in the Ukraine, are you confident that the 
interim Ukrainian Government is a stable partner for USAID?
    Ms. Alexander. Thank you, Congressman Meeks.
    The benefit of the people that we have worked with in 
Ukraine is that one of the development assets that Ukraine has 
is also its vibrant multifaceted civil society.
    So we not only work with the Ukrainian Government, we work 
directly with civil society. But we have been very impressed 
with what we have seen in the Ukrainian Government thus far. We 
have been impressed with their restraint and we consider them 
good partners.
    So we are confident that our money will be well spent.
    Mr. Meeks. And finally, Mr. Rubin, I am a firm believer in 
multilateralism in a multilateral way and I think it is vitally 
important for the United States to do that and to have this 
unified voice toward Russia for their action in Ukraine.
    How can the United States--I think this is something I just 
want you to elaborate a little bit more--better engage our 
allies in Europe to ensure that we have the same strategic 
goals and long-term planning for continued development and 
prosperity of the U.S.-European relationship? It seems there 
have been some cracks recently.
    Mr. Rubin. Well, thank you, Congressman.
    We have actually made this a very high priority and 
Secretary Kerry has spent the past 2 days in Europe, in Rome 
and Paris following his visit to Kiev working precisely on 
that--working with our allies and other interested governments 
to try to craft a united international community approach to 
supporting Ukraine to ending this conflict, to convincing 
Russia to withdraw its troops and restore its recognition of 
Ukraine's sovereignty and territorial integrity.
    We agree that this needs to be a collective international 
approach. It needs to be a diplomatic approach.
    We believe that the call of the international community for 
this to be settled through dialogue, for Russia and Ukraine to 
immediately begin talking about this can only happen if the 
international community is united in supporting this and that 
is precisely what the Secretary is in Europe doing right now.
    Chairman Royce. Chris Smith of New Jersey.
    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Rubin, how do you assess the risk of escalation by 
miscalculation? With so many AK-47s pointing at each other, 
only one troop or one soldier has to fire and things could get 
out of hand.
    You mentioned the OSCE monitors. They have been stopped. As 
you know, they can't get in. When I have visited OSCE monitors 
in other countries including Georgia, Croatia, and elsewhere 
over the years, they have such limited capabilities to mitigate 
a firefight or any kind of hostility.
    Secondly, I was in Tbilisi, Georgia a few days after the 
Russians rolled in to Abkhazia and South Ossetia. They several 
times put their tanks on a road as if they were going into 
Tbilisi, only to turn around.
    You will recall that. Their objective strategically was 
Abkhazia and South Ossetia. What is the objective of the 
Russians now?
    Is it just Crimea or are other regions and cities in 
Ukraine, particularly in the eastern area, in the cross hairs? 
And Mr. Singh, if you could, Sergei Glazyev has said that 
Russia will abandon the U.S. dollar as a reserve currency if 
the U.S. initiates sanctions against Russia.
    How seriously do we take that threat? Sanctions now have 
been levied, as they ought to be, and the Eurasia Economic 
Union had a meeting this week with Belarus, Kazakhstan, and 
Putin talking about that union that comes into force in 2015. 
How does that play into all of this?
    Mr. Rubin. Thank you, Congressman.
    The question of international observers and monitors is 
absolutely critical, as you stated. We believe that the best 
way to de-escalate this very dangerous conflict to ensure that 
there are no accidental incidents that lead to escalation is to 
have an international presence, eyes and ears on the ground, 
and that is what we have been supporting.
    That is what the OSCE has been supporting. That is what the 
special envoy of the United Nations Secretary-General is there 
for.
    We believe that they need access to all areas of Ukraine. 
They have access to all areas except Crimea. The Ukranian 
Government has been very supportive in encouraging monitors to 
come in to address any allegations of abuses, to address any 
concerns about minority rights and that is the way to address 
these concerns is through eyes and ears on the ground that can 
provide an objective assessment of what is going on and also be 
there as witnesses to what is going on.
    We find the fact that the monitors have had extreme 
difficulty in getting into Crimea and performing their 
activities in Crimea is very worrying.
    It is something that we consider unacceptable and we 
believe that all the authorities involved including the local 
authorities have an absolute obligation to allow that to happen 
and we will be pushing to expand the monitoring.
    We will be pushing to expand the scope of the monitoring 
and without that we fear it will be very hard to actually know 
what is going on. To answer your question as to what the 
Russians' objectives are, I have to say I think we all wish we 
knew the answer to that question.
    We have seen that, clearly, one objective is to militarily 
occupy and control the territory of the autonomous region of 
Crimea. We have condemned that. We consider it unacceptable. We 
believe the Russian forces must return to their barracks under 
their treaty obligations in the basin treaty with Ukraine.
    We certainly would condemn any further use of Russian 
military force or aggression on the territory of Ukraine. We 
hope that we will not see any further use and that we can 
return to a diplomatic dialogue to end this very, very 
unfortunate situation.
    And with that, let me turn to Mr. Singh.
    Chairman Royce. The reserve currency portion of it, Mr. 
Singh.
    Mr. Singh. Yes. Congressman, let me give you a simple 
answer. Russia doesn't get to decide the world reserve 
currencies or the United States level of interest rates. That 
is determined by our economic outlook and our monetary policy.
    We have the most deep and liquid capital markets. We have 
the most attractive investment environment. This is not--we 
control our own destiny in this regard, not Russia.
    Chairman Royce. We go to Albio Sires from New Jersey.
    Mr. Sires. Thank you, Mr. Chairman, and thank the members 
that are here today.
    You know, I certainly believe that we should have strong 
sanctions. I don't think Putin understands anything else. But 
how can we get strong sanctions when Europe over the last few 
years has become more and more dependent on energy from Russia? 
And, for example, Germany didn't jump right away because 
obviously, we think it is something like 40 percent of the gas 
from Russia.
    So how can we get a consensus to come up with strong 
sanctions against Russia when they are so dependent? So and the 
other question that I have is Russia is threatening that if 
strong sanctions start to impact their economy they are going 
to go after the assets that we have in Russia--our American 
assets.
    What are we prepared to do if they go after those companies 
and American assets in Russia?
    Mr. Rubin. Thank you, Congressman.
    Let me address, first, the question of coordinating 
sanctions policy with our allies and partners. The European 
Council of the European Union yesterday issued a very 
comprehensive framework for imposing sanctions and the leaders 
of the nations of the European Union are meeting today to 
consider that.
    We believe that our allies and partners in Europe 
understand the seriousness of this. We have been working very 
closely with them including Secretary Kerry's meetings 
throughout the past 2 days in Paris and Rome and we agree with 
you that there needs to be a coordinated international approach 
to make clear to the Russian federation that there will be 
serious consequences for Russia, for the Russian economy, for 
Russia's standing in the world if Russia continues its current 
course of action.
    This is not intended as a threat. This is not intended as 
any form of economic coercion on anyone's part. This is 
intended to say that the international community is based on a 
set of principles, a set of laws of the United Nations Charter, 
the Helsinki Final Act--all of the obligations that members 
have toward each other and it must be followed.
    That is the basic foundation of the international system 
and of the post-war settlement in Europe. So this is simply a 
clear message to Russia that Russia has to return to respecting 
those norms, those commitments, those laws.
    We believe that there will be coordinated international 
action, that it will not be just the United States imposing 
sanctions and other forms in response to Russia's actions. We 
believe we will see that very shortly and we will work very 
hard to ensure that this is a coordinated international front.
    I would add just to say that we will very strongly support 
the rights of our companies, our investors and the basic 
principles of international law and all the other obligations 
that countries have toward foreign investors and we take that 
obligation very seriously.
    Mr. Sires. Mr. Singh, can you address the issue of----
    Mr. Singh. Sure. Congressman, Mr. Rubin is right. We are 
working very closely with our European counterparts.
    But the reality is, you know, Russia is a--it is a very 
large economy. It is a $2 trillion economy, eighth largest in 
the world.
    There are interconnections on the trade front, on the 
financial front, on the market front. It is important that we 
are proportionate in our response, depending on Russia's 
actions.
    With respect to the energy question in particular, I would 
just observe there is a--there is a co-dependence. Yes, Europe 
relies--you know, roughly a third of their energy imports come 
from Russia but so too does depend on those earnings--on those 
export earnings to Europe. And so they also need to be careful.
    Mr. Sires. Thank you, Mr. Chairman.
    Chairman Royce. We go to Mr. Steve Chabot of Ohio.
    Mr. Chabot. Thank you, Mr. Chairman.
    President Putin's recent explanations for his aggressive 
actions in Crimea don't pass the laugh test. Putin suggests 
that he is obligated to protect his fellow Russians in Ukraine 
when, in fact, Crimea was last part of the old Soviet Union 
back in 1956. I was 3 years old when it became part of Ukraine 
and remained so after the fall of the Soviet Union and the 
advent of an independent Ukraine in 1991.
    His arguments are weak and his actions are, clearly, in 
violation of international law. But, unfortunately, there is 
the perception, at least, that there is a growing power vacuum 
around the world and various bad actors are filling it from the 
Middle East, the South China Sea, now to Ukraine.
    In the last few weeks, we heard from the White House about 
consequences, all options on the table, and so forth. It wasn't 
that long ago, my colleagues will remember, that we were 
hearing about drawing a line in the sand and, frankly, I fear 
that there may be a growing perception among our friends and 
allies in the international community that the United States, 
at least in the area of foreign policy, lacks resolve.
    So I hope our witnesses this morning will be able to 
alleviate some of those concerns. A couple of questions--where 
are we in regards to our cooperative efforts with our European 
partners? I have heard some vague comments about consequences 
from European officials. How serious are they? Who are the 
players in the region that are working closest with us and 
where are the weak links?
    It has been suggested that some of our allies in Europe 
would never agree to strong sanctions on Russia because of the 
fear that their sources of energy supplies would be cut off. 
Well, here is an idea: Perhaps our friends in Europe would be 
able to avoid that fate if they in fact produced more of their 
own energy, which is present but untapped because of their own 
domestic energy policies, which we encourage. Or even better, 
the Obama administration could reverse its anti-production 
policies. Approve the Keystone Pipeline, for example and open 
up ANWR. If we encourage the development of our shale export 
program, the Europeans could buy their energy from us while 
increasing American manufacturing jobs. Just a thought.
    I have given you a lot to think about. Any comments?
    Mr. Rubin. Congressman, thank you.
    Let me say that in terms of assuring that we have unity of 
purpose and action with our allies and partners in Europe, this 
is our highest priority. Again, this has been the main 
objective of Secretary Kerry's work in the past several days in 
Europe.
    We believe we have seen clear statements that the leaders 
of the European Union, of the European Union's member states 
and of countries in Europe that are not members of the European 
Union are very serious about the threat that this set of 
developments poses will take action and we are working very 
hard to coordinate our action with them so that we are 
presenting a strong coordinated front on this.
    Let me also say that we have seen action taken by countries 
not in the European Union and countries in the European Union 
already to impose sanctions to freeze accounts, to take other 
steps, visa bans, to make clear that there will be consequences 
for a violation of the international order.
    Additionally, let me mention that it is our highest 
priority to ensure that the solemn commitments that we have 
under the North Atlantic Treaty to our allies in Europe are 
upheld.
    We take that obligation with the utmost seriousness. We 
have worked within NATO in the past several days to ensure that 
we are prepared within the alliance to support all its members.
    We have taken action to expand our Baltic air policing 
mission, our aviation detachment in Poland. The North Atlantic 
Council issued a very strong statement on behalf of all the 
allies and we will be working very closely with them in coming 
days and weeks to ensure that the alliance stands strong and 
united on this.
    The last point that you mentioned, I would just like to say 
that energy diversification has been at the heart of our policy 
toward Europe for the past 25 years under every administration 
and it remains at the heart of that.
    Obviously, there is still a long way to go but we strongly 
believe that diverse sources of energy, lack of reliance on a 
single supplier, is very important for Europe's security and 
future development.
    Thank you.
    Chairman Royce. We go now to Mr. Brian Higgins of New York. 
Or did you have a point you wanted to make, Mr. Singh?
    Mr. Singh. I was just going to make the point that it is 
clearly important to collaborate closely on sanctions but we 
should also acknowledge a very welcome announcement by Europe 
yesterday in terms of their assistance to the Ukrainian people.
    And what is important right now is that we all come 
together as an international community and meet Ukraine's 
financing needs as it makes the reforms it needs to achieve 
economic stability which will pave the path to an independent 
political future.
    Chairman Royce. Thank you. Mr. Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    Russia has violated all kinds of international laws 
including the treaty they signed with Ukraine guaranteeing its 
borders in return for which Ukraine gave up its nuclear 
weapons.
    Russia's occupation of Ukraine is a direct and clear 
violation of Ukraine's sovereignty and territorial integrity. 
President Putin has acted like a international street thug, and 
in 1994 when Russia was included into the G-8 it was a 
recognition that the post-Soviet Russia was behaving like an 
honorable member of the international community and not a rogue 
state.
    If Russia's behavior has changed then it would seem to me 
that Russia's status as a member of the G-8 should change a 
little bit more aggressively than simply a suspension. Their 
membership should be revoked. It should be revoked.
    Number two--NATO, which is 28 countries including the 
United States and Canada and 26 European countries, was 
essentially established to safeguard the freedom and security 
through political and military means.
    It was a vehicle through which democratic principles could 
be promoted. Any thoughts about the idea of permanently kicking 
Russia out of the G-8 and offering membership to the--to 
Ukraine in NATO?
    Mr. Rubin. Thank you, Congressman.
    As the White House announcement stated this morning, we 
have suspended all preparations for attending the G-8 summit in 
Sochi, and as we have said previously it is hard to imagine 
that the President would go under current circumstances.
    The larger question you ask, obviously, is something that 
the President will need to consider and I think this gets to 
the bigger picture question, which is Russia's role in the 
world, how Russia participates as a member of the international 
community under the structures and laws and obligations that 
all members of the international community have toward each 
other.
    So I think the larger question is very clear. We, as I 
mentioned, take the North Atlantic Alliance and its obligations 
solemnly, seriously and we are looking actively to consider how 
we can do more as an alliance to respond to this set of 
developments.
    But I would also add that we have said all along that the 
alliance is based on a set of values and commitments and 
principles what kind of societies have come together and in 
this case we have stated publicly, for example, that Georgia 
will be a member.
    That was stated twice by the alliance and remains our 
position, and we believe that all societies should have the 
right, all countries based on the will of their people, to 
choose their alliances, their friendships and the organizations 
that they wish to join. So that is just a basic set of 
principles.
    But that is something that each country should be free to 
decide for itself. That is the most important principle.
    Chairman Royce. We go to Mr. Mike McCaul of Texas.
    Mr. McCaul. Thank you, Mr. Chairman.
    Mr. Rubin, I recently went to Russia and I got the sense 
that Mr. Putin is sort of going back to a Cold War mentality. 
This is more of a philosophical question.
    Do you believe that Russia is intent on reconstituting its 
empire?
    Mr. Rubin. I think, as I said earlier, I don't really want 
to speculate about why Russia is doing what it is doing 
because, honestly, we don't know and I think what we have to 
judge is simply what is Russia doing.
    And what we see Russia doing is what has caused so much 
concern and that is intervention on the territory of another 
sovereign state through military force and other coercive 
means.
    Mr. McCaul. Well, which--and my time is limited--which they 
have done prior. I think we learned from history they invaded 
Georgia and then they continued to occupy Georgia. I think that 
is very instructive as to the Ukraine experience today.
    In fact, Crimea just voted to join Russia. It was announced 
today and I am concerned that the same thing that happened in 
Russia will now happen in--that happened in Georgia will happen 
in Ukraine and I don't know if these sanctions will stop that.
    That is my biggest concern. When one nation invades the 
sovereignty of another we usually--definitions are important--
we usually define that as an act of war. Does this 
administration believe that the Russian invasion of Ukraine is 
an act of war?
    Mr. Rubin. Well, Congressman, we have said very clearly 
that we know what we have seen, which is military aggression, 
intervention in the affairs of a sovereign country--a violation 
of legal commitments, violation of international law.
    That is what we see. That is what we are calling it. I am 
not an international lawyer so I wouldn't want to get into the 
terminology but I think it is pretty clear what we are seeing.
    It is clear also that Russia continues to occupy territory 
of the Republic of Georgia. That is something we have been very 
clear in condemning and it is also clear that their commitments 
that all countries have to each other to settle their disputes 
peacefully and that is certainly not what we are seeing here. 
So I----
    Mr. McCaul. Well, I do think we should call it what it is. 
I think you said it is very clear it is a violation of 
international law. I believe it is also very clear that this is 
an act of war against another nation.
    When we look at the NATO, I think--I think Mr. Putin feels 
very threatened by the European Union and NATO. Poland called 
for an emergency meeting of NATO to discuss its concerns about 
this Russian aggression. What are we doing to ensure that 
Poland and our other NATO allies are protected?
    Mr. Rubin. Well, one of the things we are doing is 
increasing our aviation detachment deployment. We are also 
working to ensure that the Baltic states have the support they 
need to defend their territory and that is why we have 
increased our commitments to the Baltic air policing mission 
with additional planes and refueling, and we are working in 
Brussels at NATO to address any other concerns that the allies 
have.
    As I said, we take these obligations extremely seriously 
and we will do our utmost to ensure that the alliance stands 
together.
    Mr. McCaul. Thank you. Thank you, Mr. Chairman.
    Chairman Royce. If I can make a quick announcement here 
before we go Karen Bass of Los Angeles, our strategy will be to 
recess. I think our witnesses know how Congress operates.
    We have got amendments up on the floor to the energy bill. 
There is about six of these amendments, 2-minute votes. So we 
will recess until we get to the recommittal debate and that 
will give us time to come back and finish some of the 
questioning.
    And with that, let us turn to Karen Bass.
    Ms. Bass. Thank you, Mr. Chair.
    I believe my question is brief and it is for Mr. Singh. Mr. 
Singh, on Page 3 of your testimony you talk about the IMF and 
what is needed as an economic adjustment program that 
eliminates unsustainable economic imbalances and poorly-
targeted government subsidies.
    I was wondering if you could be more specific as to what 
those subsidies are, what needs to be changed. And then also is 
the IMF support contingent on that?
    Mr. Singh. Thank you, Congresswoman.
    So that is precisely how the IMF works. Its assistance is 
contingent upon economic reforms being met and these reforms 
are good for Ukraine and the three core forms that I 
referenced, number one, there has been an unsustainable build-
up in fiscal spending over the years in Ukraine. That needs to 
be addressed.
    Number two, there are truly massive energy subsidies that 
have been a part that have played----
    Ms. Bass. Subsidies to companies or subsidies to the 
population?
    Mr. Singh. To the population--to tariffs that are paid for 
heating and gas and so forth. And that has led to consumption 
of energy that is among the highest in the region.
    Ms. Bass. Would you be concerned that some of the reforms 
might cause problems, dissent if subsidies are cut off? You 
know what I mean?
    Mr. Singh. So that is why our notion on the loan guarantee 
is to try to direct the proceeds of that issuance--it is a bond 
issuance that we have in mind--and direct that toward the more 
vulnerable segments of the Ukrainian society so that those 
reforms are easier to implement and that they don't fall on 
those who can least afford to bear them.
    And then the third piece, apart from moving on the energy 
subsidy problem, which I mentioned has led to over consumption 
and reliance on Russian gas, I should say, is on their exchange 
rate.
    It is overvalued. It has caused them to have a real problem 
in terms of exports. It has made their economy uncompetitive.
    One last thing is I should say it is very good news in 
terms of the political will that we are observing on the ground 
that we are already seeing some movement on these reforms. The 
currency in Ukraine has weakened quite a bit and become much 
more flexible.
    It is becoming much more driven by market forces. That is a 
condition of the IMF and the leadership of Ukraine has shown a 
willingness already to move in that direction. That is a very 
positive sign.
    Ms. Bass. Do you think--I know that elections are 
supposedly scheduled for May. Do you think there is the 
leadership there with the current person that is in power just 
run for election? And that is to anybody. And then thank you, 
Mr. Chair.
    Mr. Rubin. Congresswoman, the elections have been set for 
May for the Presidential elections in Ukraine. The candidates 
have not yet been formally announced nor has anyone formally 
submitted their candidacies. So we are not sure.
    But the current Prime Minister had indicated he would not 
be a candidate and would just be running the interim 
government. We will have to see what develops but we do believe 
it is absolutely critical that there be a fully free, fair 
election in Ukraine to choose its new President.
    Chairman Royce. Okay. We are going to go to Mr. Bill 
Keating of Massachusetts. Would you like to have the last 
question before we recess?
    Mr. Keating. Thank you, Mr. Chairman. A couple of quick 
questions.
    Number one, NATO Secretary-General Rasmussen has said the 
alliance plans to intensify its cooperation with Ukraine. Could 
you give us a more detailed description in terms of NATO's 
plans and if the Ukrainian Government were to request a 
membership action plan would the administration consider that, 
possibly support it? That is question number one.
    And the other one simply deals with IMF quota reform. Will 
that improve the flexibility and to make sure that our dollars 
and IMF funds are more effectively used and we don't have 
squandered money--you know, that important taxpayer money from 
the U.S. and money from our European allies will that provide 
more ability to maximize the use of that?
    So those are the two questions. Mr. Singh can take the 
second. I don't know, Mr. Rubin, if you want to take the first.
    Mr. Rubin. Certainly, Congressman. Thank you.
    On the question of Ukraine NATO cooperation, Ukraine has 
been a member of NATO's partnership for peace for two decades 
and we have a very extensive positive experience working 
together with Ukraine on training, on improving the readiness, 
on all sorts of questions that relate to building a modern 
military--civilian military control and that is something that 
we certainly hope to continue.
    And the Ukraine has admission to NATO. We have regular 
meetings at the NATO Ukraine council in which that can be 
discussed and as a matter of fact we just held a session in 
light of the current events at Ukraine's request.
    So we have a very strong partnership through the 
Partnership for Peace, through the NATO Ukraine council and we 
do want to continue to develop that with the new government 
and, in the future, with the new President.
    Mr. Keating. Specifically with the membership action plan, 
I can't see--in the very near future I can see the need to 
address this issue, frankly, because our options are limited 
now and if Ukraine is interested and wants us to pursue this 
will we entertain those discussions? Will we be supportive?
    Mr. Rubin. Well, Congressman, we have said from the 
beginning that countries need to be free to choose their 
memberships, their alliances, their commitments to other 
countries, that this is basic principle of sovereignty, and 
therefore as a matter of basic principle NATO is an open 
alliance.
    I think in terms of what the people of Ukraine want, what 
the Government of Ukraine wants it will be up to them to decide 
and we will be very interested in having that conversation 
based on what they tell us.
    Mr. Keating. Okay. On IMF quota reform.
    Mr. Singh. Yes. Congressman, the answer is absolutely. This 
IMF quota reform would not require a single extra dollar of 
U.S. financing to the IMF but it would preserve our lead role 
as the world's preeminent responder, the first responder to 
financial crisis.
    It preserves our voice and our influence at the institution 
that will be at the very center of the assistance in Ukraine.
    And by the way, it also increases the IMF's flexibility to 
respond to the situation on the ground in the event of the need 
for a bridge financing to a larger package, which should be a 
slam dunk.
    Mr. Keating. Okay. Thank you.
    Chairman Royce. Mr. Deutch, you have a minute, if it is all 
right.
    Mr. Deutch. Thank you, Mr. Chairman.
    I just have--I want to focus the discussion a different 
way. In addition to targeting individuals responsible for 
undermining the democratic process and threatening the 
territorial integrity of Ukraine, are you considering 
additional robust sanctions that would have a more significant 
impact on the Russian regime?
    For example, will you look to impose sanctions--Mr. Singh, 
this is my question to you--will you look to impose sanctions 
that have been discussed previously for those providing the 
funding and equipment necessary for the Syrian regime to kill 
and terrorize its own people?
    That, it seems to me, is a way to really strike at Russia 
in a way that is significant and appropriate.
    Mr. Singh. Congressman, let me just say we have not listed 
specific individuals or entities today but this is a--this is 
broad authority that we will use as appropriate, given the 
situation on the ground.
    Mr. Deutch. Is it appropriate--is it appropriate to impose 
sanctions on those individuals who--in Russia who are assisting 
the Assad regime in slaughtering its own people?
    Mr. Singh. Well, Congressman, I can only say that this 
specific tool is designed to allow us to sanction those who are 
most directly involved in destabilizing Ukraine including the 
military intervention in Crimea.
    But it does not preclude further steps to be taken if the 
situation escalates. I can't comment on your specific question 
on Syria, unfortunately.
    Mr. Deutch. So there is--so it does not provide the 
opportunity. Would you support--do you understand the 
opportunity though to impose sanctions in a significant way 
that would impact the Russian regime and the decisions they 
make by going after those who are responsible for aiding Assad? 
That is the question you can't answer.
    Mr. Singh. I will have to come back to you with a full 
response.
    Mr. Deutch. I appreciate it.
    Chairman Royce. We stand in recess.
    [Recess.]
    Chairman Royce. Going to go to Mr. Cicilline of Rhode 
Island.
    Mr. Cicilline. Thank you, Mr. Chairman. I thank you for 
convening this hearing. Thank you to our witnesses.
    I think we all understand the urgency of the moment and the 
necessity of joining our international--joining an 
international response to the clear act of Russian aggression, 
and I presume that many standard review or assessment 
procedures are likely to be expedited or maybe even waived.
    So I would like to just ask you to speak to the sort of 
long-term obligations of the United States that we are 
contemplating.
    Typically, the United States requires that U.S. credits in 
volatile countries are administered by an independent facility, 
administered under U.S. supervision. Will that be the case 
here? Who will administer Ukraine's payment of interest on the 
bonds and repayment of principal?
    Will the U.S. have effective oversight? How will that occur 
and what do you assess the prospects for successful repayment 
and what happens if that does not occur?
    And, finally, in addition to the loan guarantee what other 
sorts of aid is the administration considering for the Ukraine? 
I assume, Mr. Singh, you would be the best to begin.
    Mr. Singh. Thank you, Congressman.
    The way the loan guarantee works is that the U.S. 
Government guarantees the repayment of the principal and 
interest on a bond that would be issued by the Ukraine 
Government.
    Okay. So the cost to U.S., the way that it is calculated, 
is that there is an assessment of the possibility that the 
Ukraine Government cannot repay the interest in principal, in 
which case the U.S. Government would be responsible, and that 
is how it is designed.
    Now, the way we can mitigate that risk is twofold. One is 
that we make the loan guarantee conditional upon the existence 
of an IMF program, which has strong conditionality and 
increases the probability of repayment, and, number two, we can 
use the proceeds from the loan guarantee to lessen the impact 
of those reforms on the most vulnerable segments of the 
Ukrainian society and therefore that makes reform 
implementation--the success of it more likely.
    Mr. Cicilline. And in addition to the loan guarantees, what 
other aid is the administration considering and what other 
things can we do to support that?
    Ms. Alexander. Thank you for your question, Congressman.
    I think the reality is we have had a bilateral support 
program with Ukraine since 1992 and we have spent a lot of 
money and we have worked with the government and we have worked 
with civil society very effectively.
    As we look at the Fiscal Year 2015 request that we just 
made, obviously, that was drawn up, as well as the 2014 
request, before we knew what the actual needs were going to be.
    So as my colleague was talking about what the IMF team is 
looking at, USAID in particular will go in and look at the 
various elements of technical assistance needed to support 
that, whether it is through banking supervision, whether it is 
through energy, subsidies, as we were talking about.
    But most importantly and immediate, I think we have the 
elections in front of us and those are something that I think 
is going to provide a lot of emphasis for the Ukranian people 
to recognize their true ambitions and where they want to go. 
And so we want to make sure those are as free, fair and 
transparent as possible.
    Mr. Cicilline. Thank you very much. I yield back, Mr. 
Chairman.
    Chairman Royce. Thank you. Mr. Kennedy of Massachusetts.
    Mr. Kennedy. Thank you, Mr. Chairman. Thank you to the 
witnesses and I appreciate your testimony earlier. Sorry for 
the brief break.
    Mr. Singh, I wanted to build off a little bit of what one 
of my colleagues said earlier. Russia has threatened to not use 
the dollar as the reserve currency. They also have threatened 
to not pay back some outstanding loans to the U.S. and other 
European nations.
    Are you, again, at all concerned about that or can you 
assess the validity of that threat--what the economic outcome 
of that might be?
    Mr. Singh. Congressman, thank you for your question.
    I don't think it would be prudent for me to speculate about 
the various scenarios that could unfold. What I would say 
again, though, is that Russia does not get to decide whether 
the U.S. dollar is a reserve currency and that we control our 
destiny in that regard.
    Mr. Kennedy. And I appreciate that, sir. But with regards 
to outstanding loans or can you just give me some idea as to 
the volume of--loans outstanding that they have, if that is a 
threat? Are we talking about single billions, tens of billions, 
what kind of order of magnitude where we are at?
    Mr. Singh. We have some initial data on the amount of 
claims that reside in the U.S. financial system to Russia. Our 
exposure is somewhat lower than that of Europe, and as it 
relates to our system in particular it is well under 1 percent.
    Mr. Kennedy. Thank you. And then, perhaps Mr. Rubin or for 
any of you, I understand from some of the materials that were 
provided this morning the IMF is currently doing an assessment 
of the Ukrainian economy at this point.
    There has been some issues with transparency, some issues 
with the full disclosure of the true state of that economy. I 
think the figures that I have seen at least somewhere between 
$20 billion and $35 billion over the course of the next year or 
so.
    How long until that full assessment is done and do you--
with any degree of certainty are you confident that that figure 
in there, again, is accurate or is there a potential for what 
is needed to actually shore up the finances in Ukraine to be 
quite a bit larger?
    Mr. Rubin. Congressman, thank you for your question.
    On the actual figures, I will defer to Mr. Singh. But let 
me just say that we have been saying now for years that Ukraine 
needed to address the very serious deficiencies, not just in 
its economic policy making, but in the entire way its economy 
was structured.
    And we have said all along that the way to do that was to 
engage in a serious dialogue with the International Monetary 
Fund, bring in the people who know how to do these assessments 
and then have a serious negotiation. The previous government 
did not do that and as a result did not get the help and the 
advice that it needed.
    We are very encouraged by this current interim government's 
readiness to engage--to engage with the fund, to welcome the 
advice and to begin making the difficult reforms.
    We believe that the package that includes IMF support, that 
includes IMF quota reform, which we do believe is critical to 
getting us to be able to have the kind of IMF support to 
Ukraine and other countries that find themselves in this kind 
of situation, is a critical part of that package.
    And then the bilateral assistance that we are committed to 
providing together with an IMF package that the European Union 
has now committed to providing can get Ukraine through this 
very difficult period but also launch it on a healthy path back 
toward prosperity and economic stability.
    And let me just ask if Mr. Singh had anything to add.
    Mr. Singh. Sure. I will just say that there are a wide 
range of market estimates out there in terms of Ukraine's 
financing needs. I don't want to speculate without having the 
facts.
    That is why the IMF is there, as you suggested. They are 
going to provide that transparency in terms of the financing 
needs of Ukraine.
    I will say that in their estimate of what Ukraine needs 
much of that is going to depend on the willingness of the 
Ukranian authorities to undertake the needed reforms and every 
indication that we have is that they are willing to make the 
hard decisions.
    So I should just add that the IMF and the international 
community have more than enough resources to meet Ukraine's 
needs so long as it is willing to make the commitments to 
reform.
    Mr. Kennedy. And any idea--if I can, Mr. Chairman--just any 
idea when we will see that report from the IMF? Is that weeks 
away, days away?
    Mr. Singh. It really depends on the speed with which the 
relevant data can be handed over and analyzed. It doesn't need 
to take a long time.
    Mr. Kennedy. Thank you, sir. I appreciate that. Thank you 
for your time.
    Chairman Royce. Thank you, Mr. Kennedy. I appreciate it.
    Let me ask a question just about the brutality against 
reporters there--this is one of the concerns I have about the 
ability to get the free flow of information out around the 
Ukraine.
    We had both Radio Free Europe, Radio Liberty and the Voice 
of America targeted by security forces there, pro-Yanukovych 
security forces. We had two Radio Free Europe reporters who 
were badly beaten and then detained in January.
    A prominent journalist and contributor was forced to leave 
the Ukraine due to death threats in mid-January, and in VOA we 
had a Ukrainian Service TV reporter who faced repeated 
intimidation following his coverage of the auto Maidan 
motorcade protest.
    So in the run-up to the next elections in the Ukraine, it 
seems to me that uncensored information, sort of a surrogate 
radio to give real-time information about what's actually 
happening on the ground and to discredit misinformation, is 
going to be very important.
    What steps are being taken to increase messaging to the 
Ukrainian people and, specifically, one of my concerns is how 
do you focus that, target that to eastern Ukraine and maybe 
people in Crimea to make sure that they have got the real case 
of what is going on?
    Ms. Alexander. Thank you, Chairman.
    We have been working very effectively with the public 
diplomacy arm of the Embassy to do exactly that. As you saw, 
the White House fact sheet yesterday came out about the top 10 
myths that are being portrayed out there.
    The independent media has been a really bright spot that we 
have seen throughout Ukraine over the years. Just today, the 
Ukrainian Crisis Media Center was stood up by Ukrainian 
activists themselves and these are things that we honestly 
don't have to financially support because they are doing it 
themselves.
    However, we are trying to give a bit of a bully pulpit and 
try to amplify the messages that they are putting out. I think 
you are right.
    In the lead-up to the election that will be one of the most 
important elements is to make sure that this information is out 
there, and we have been training journalists and we have been 
working effectively with a lot of burgeoning stations that 
really have been trying to get the message out.
    Chairman Royce. I do think, and I have talked to Croatian 
journalists and others, years ago I tried to restart Radio Free 
Yugoslavia. By the way, we never had that.
    That was the one country we never broadcast in during the 
Cold War and I have had a number of reporters there tell me 
that the--you know, you saw the way the Czech Republic and 
Slovakia handled this without any loss of life.
    They told me if there had been a surrogate radio like we 
had with RFE broadcasting into the country it would have been 
possible with hate radio for each of these ethnic groups to 
whip up the types of hatreds that were created.
    And that is why I think at the end of the day, having this 
kind of capability going in before the election while at the 
same time reassuring Russian-speaking Ukrainians, you know, 
that the Ukranian Government is going to respect all languages, 
but I think these broadcasts have to be not just in Ukrainian 
but in Russian.
    I am going to follow up with you on that. But let me just 
say at this moment we are going to have to adjourn in order to 
get to the floor for the final vote.
    Thank you very much for your testimony here today.
    [Whereupon, at 11:01 a.m., the committee was adjourned.]
                                     

                                     

                            A P P E N D I X

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         Material Submitted for the RecordNotice deg.


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 Material submitted for the record by the Honorable Edward R. Royce, a 
Representative in Congress from the State of California, and chairman, 
                      Committee on Foreign Affairs


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